To bring the Covid- hit economy back on rails, the government's mega National lnvestment Plan (NIP) to give the much-needed financing boost to infrastructure development, as part of the Infrastructure Vision 2025 holds lot of promise with enabling policy initiatives.

Part 1 

By Dr Molishree    

Infrastructure plays a pivotal role in economic development. The pandemic has created serious challenges, critical to attaining sustainable infrastructure. With India set to have 40% urban population by 2030 and 29% of the population still lives in slums, a big housing infra challenge stares at us.  Similarly, population growth pressure will push energy demand by 50% by 2030, underscoring the need for sufficiency and sustainability of energy. Also, considering that 5 billion people could face water shortage by 2050, there’s urgent need to improve water infra to ensure access to water for all. The poor waste management is posing not just a challenge to environmental sustainability but also to health and economic growth. Post- Covid, there's greater realization and urgency to strengthen our health infra.

In this backdrop, all the policies and programmes undertaken by the government to boost infrastructure face a challenge of another dimension. Amidst resource crunch, it’s tough to manage complex and long-term projects with multiple stakeholders. Moreover, technology is also a big challenge. Keeping this in view, the government has integrated all its schemes into Infrastructure Vision 2025, formulating an INR 111 trillion National Investment Plan (NIP) to meet the funding needs of infrastructure development. 

The 10 NIP goals are to ensure affordable clean energy, digital services access for all, convenient and efficient transportation and logistics, housing & water supply, doubling farmers income, quality education, sustainable smart cities, good health and wellbeing, disaster resilience and leveraging technology for public good.

The NIP vision is to provide stimulus to economy by streamlining project implementation and facilitating investments. Its very purpose is to create valuable assets, build investors' confidence, broaden revenue resources, grow businesses, generate employment and improve ease of living and enable inclusive growth. In order to achieve infrastructure vision, a proper investment plan has been devised by the government. Under NIP, the Centreis implementing 67% of total projects, States are implementing 32% followed by private sector (1%).

In the current scenario when pandemic has put tremendous pressure on financial resources, public funding holds key to infra financing. At the same time, the private sector investment has to make a significant contribution. Especially as private investment in infrastructure in India is quite low. According to the ADB report, while in developed countries like Britain and Australia, the private sector contribution to infra financing is about 50%, in India Private Sector Contribution is much lower. As such,there is an urgent need to come up with innovative investment and funding mechanisms along with enabling governance and policy framework to encourage private investment. For enabling public- private sector collaboration, the government will be lining up enablers like data-based policy decisions, enhancing execution capability of private players, augmenting ease of doing infra projects, focus on disaster resilience and policy push for equitable risk sharing and autonomous regulation in all infra sectors. 

Roads, Railways, Urban & Rural Infrastructure, Energy, Airports and Ports are the top focused sectors under NIP and Infrastructure Vision 2025. There is equally important emphasis on the social sector- Healthcare and Education.

While there are good prospects for Infra Vision 2025 and NIP, there are challenges as well. Even a year after the inception of the scheme, only54% projects are under implementation. Around 18% of projects are under conceptual stage and 22% under development stage. Under NIP(with expanded project pipeline of 8,155 projects), 389 projects worth Rs315,253 Crore have been completed. Going forward, raising requisite funding will be a challenging task. Realizing this, the government has already gone ahead to set up Development Finance Institution (DFI) for long-term infra financing. DFI, with a capital infusion of Rs 20,000 crore, will be raising Rs 3 Trillion for infra spend.

Along with government funding, private investment holds key to infra financing.Lack of bankable projects, inadequate contract enforcements and unpredictable financial capacity of urban local bodies are the hurdles for catalyzing private investment. To ensure adequate private investment, the government has formulated a massive asset monetization of public entities. A target of raising Rs6Trillion has been set through assets monetization in 13 sectors , 20+ asset classes in a 4 year period FY’ 22-25 including roads, rail , electricity transmission, oil and gas pipelines, telecom towers, sports stadia etc. Railways Ministry is targeting Rs1.52 Trillion crore through asset monetization in 2022-25.In telecom, the plan is to monetize assets of MTNL, BSNL and Bharat net. The Commerce Ministry will be monetizing the assets of fully operational and profit yielding Dedicated Freight Corridors.

Considering that during Corona disrupted 2020, only Rs 21000 crore could be raised from various sources, the government is fasttracking asset monetization and has fixed a target of Rs 1.75 Trillion for FY 22. The key to success of NIP and Infra Vision 2025, will largely depend on creating favorable conditions through appropriate policy initiatives to mobilize required funding.

India is not the only country which has created a National Level Infrastructure Pipeline. A good example to look at is UK which published details of £ 500 bn pipeline of investment in infrastructure in Dec 2016. Government of UK established a new Infrastructure & Projects Authority (IPA) which provides expertise, knowledge and skills in managing and delivering major economic projects for the government. The IPA brings together financing, delivery and assurance of projects ranging from large-scale infrastructure projects to major transformational programmes. It is time India should also look at setting up such a highly specialized authority to oversee and monitor NIP whichshould set a clear strategic direction. The functions of this new institution could be pipeline development, policy, delivery profession, training, standards, market outreach, operational support, project monitoring etc. The proposed institution should deal with all aspects of major project delivery. The objective of this new institution should be to drive continuous improvement in the way government delivers infrastructure and major projects in post COVID scenario.

Dr Molishree is an Indian Economics Service (IES) officer of 2011-batch. She is currently serving as Deputy Secretary in Infrastructure Policy & Finance Division, Department of Economic Affairs, Ministry of Finance, Govt of India.